Crude oil prices showed little movement on Monday as harsh winter weather in the United States cut daily output by about 250,000 barrels, offsetting broader concerns about rising global supplies. This balance came amid reports of steady demand growth and geopolitical tensions affecting producers like Iran, Venezuela, and Russia.
Background
Oil markets have faced a mix of pressures in recent months. Global production dropped in late 2025, helping bring supply and demand into rough balance by December. Output fell by 900,000 barrels per day from a September peak, thanks to declines in the Middle East, Kazakhstan, and sanctioned nations. Russian production bounced back sharply, up 550,000 barrels per day in December to a 33-month high, despite attacks on its facilities.
The United States saw its own challenges from severe cold snaps. Storms across large parts of the country halted drilling and reduced crude flows. Natural gas prices spiked to nearly $8.15 per million British thermal units at the Henry Hub benchmark last week, signaling high heating demand. Inventories for natural gas and other energy sat above five-year averages, adding to market strain.
Looking back, 2025 brought shocks from US tariffs on trade partners, which initially slowed demand forecasts. Consumption still grew close to 1 million barrels per day that year. Now, into 2026, markets eye a shift. Production from the Americas—led by the US, Canada, Brazil, Guyana, and Argentina—drives most gains. US output growth is slowing to about 3% year-on-year, reaching around 13.8 million barrels per day, as lower prices curb expansion.
Geopolitical moves play a role too. US actions against Venezuelan oil tankers slashed exports from 880,000 barrels per day to 300,000 in early January. Sanctions on Iran add uncertainty. Earlier talk of US naval moves near Iran and steps back from tariff threats over Greenland stirred trader nerves, but prices settled.
Key Details
US Winter Impact
Analysts estimate US crude losses at 250,000 barrels per day from winter conditions. Refineries face seasonal maintenance, cutting global crude runs by 1.7 million barrels per day from December to March. This could build crude stocks further, with November already seeing a 2.5 million barrel per day inventory rise, mostly crude.
Onshore storage jumped by 64 million barrels last month, while floating storage for sanctioned oil grew smaller. Natural gas demand surged with the cold, pushing electricity prices up as well. An Arctic front brought frigid temperatures to the eastern two-thirds of the US over the weekend, testing energy systems.
Global Supply and Demand Outlook
The International Energy Agency sees world oil supply growing by 2.5 million barrels per day in 2026, averaging 108.7 million barrels per day. Demand should rise by 930,000 barrels per day, up from 850,000 in 2025, led by jet fuel and petrochemicals. Still, this points to imbalance—a supply glut peaking at 4.5 million barrels per day in the second quarter.
December production hit 107.4 million barrels per day, down 350,000 on the month. Q4 2025 surplus narrowed to 2.7 million barrels per day. Russian gains offset losses elsewhere, but structural capacity from the Americas looms large. Forecasts differ slightly—some see demand up by 1 million barrels per day—but consensus warns of surplus.
Venezuela's output remains unclear after US interventions. Iran's supplies face blockade risks. Weather forecasts add twists: a potential shift from La Niña could ease US winter gas demand later.
"Falling output saw the global oil market briefly return to equilibrium in December 2025, but bloated inventories and new supply injections continue to steer the world toward a major supply glut."
What This Means
Steady prices reflect traders weighing US disruptions against the glut ahead. Short-term, winter cuts and maintenance tighten near-term supply, supporting crude values. Longer term, excess production from key regions pressures prices down, slowing US growth. Producers may drill less if prices dip.
Demand holds firm with economic recovery post-tariffs. Jet fuel and chemicals lead gains, but seasonal refinery slowdowns build stocks. Natural gas ties in—higher prices from cold weather boost costs across energy, potentially lifting oil-linked power needs.
Markets track US moves on sanctioned oil and Middle East stability. If Venezuelan or Iranian flows stay low, it eases glut pressure. Russian resilience amid conflict keeps supply steady. For consumers, stable oil means even pump prices for now, but surplus risks cheaper fuel later in 2026.
Investors watch inventory data weekly. Onshore builds signal real surplus, unlike floating stocks. US shale faces price squeezes—breakeven costs in areas like Haynesville hover near futures at $3.86-$3.90 per million British thermal units for gas, with oil linked.
Global LNG adds context: 29 million metric tons of new capacity online this year from Qatar, US, and others could flood spot markets, indirectly affecting oil via energy shifts. Data center power demand grows US electricity needs to 48.3 gigawatts, pulling more gas and indirectly oil.
Prices near recent highs show caution. Traders bet on supply risks tempering winter hits. Equilibrium now tips to overhang soon, shaping producer plans and buyer budgets through the year.
